China: Financial System Better Red Than Dead

magicboy

http://www.forbes.com/2009/03/26/china-dollar-g20-markets-economy-dollar.html
China: Financial System Better Red Than Dead
Beijing thinks developed economies 'excessively believe in the role of markets.'
The schoolyard fight between China and the United States that initially focused on the dollar's future escalated Thursday, as China said America should do some soul-searching before it tries to fix the economic crisis.
In a 5,000-character report by the research arm of the People's Bank of China, authorities said financial regulators, specifically in Washington, are not doing enough and hold "wrong ideas," such as that the least regulation is the best regulation. The report said financial regulators in developed economies "excessively believe in the role of markets."
The comments follow a series of volleys back-and-forth between U.S. and Chinese officials who all commented the last few days on whether the dollar should remain the world's reserve currency. It all kicked off Monday when Governor Zhou Xiaochuan of the People's Bank of China proposed that the dollar be replaced. U.S. Treasury Secretary Timothy Geithner and former Fed chief Paul Volcker weighed in, saying they do not see the dollar disappearing anytime soon. (See "Geithner and Volcker Back The Buck.")
The timing of these comments -- ahead of the April 2 meeting of the Group of 20 large industrialized and developing countries in London -- and whether China really believes what it is preaching remains to be seen.
"A lot of countries are concerned that the U.S. is the only superpower, this is a way to make them more accountable," said Marc Chandler, chief global currency strategist at Brown Brothers Harriman. "China's saying the U.S. is kind of like Spiderman: they have special powers so they should have special responsibilities."
But all this talk will not lead to countries ditching the dollar for, say, the euro, Chandler said. The proof, Chandler said, is that in the second half of last year, China increased its dollar holdings by 38.0% and continued buying through January.
"Central banks have their choice, and they're choosing," he said.
Comment On This Story
That won't prevent China from talking the talk. Authorities in Thursday report also said financial regulators in Western countries should carry out "self-criticism" before they try to reform the financial system.
But China is highly invested in the current system, which is very dollar-dependent, as are other developed and developing countries.
During the last five years, world reserve holding through the third quarter of 2008 in dollars increased by 103.4%, while euro reserves during that same period rose 119.8%. Meanwhile, the value of the euro rose 20.6% in that time compared with the dollar, showing that even though the currency's value rose, central banks maintained their dollar positions.
China's alternative to the dollar was to suggest the introduction of an apolitical world currency, namely the International Monetary Fund'sspecial drawing rights, a basket of currencies including the dollar and the euro. (See "Beijing Shows Buyer's Remorse.")
But any such adoption of the SDR, as the IMF's currency is called, is unlikely to happen: the United States, which is the major funder of the organization, controls 16.8% of the IMF's voting shares, giving it effective veto power over any decisions.
Thomson Reuters contributed to this article.


附评论：
1.
Posted by skiprob123 | 03/27/09 09:16 AM EDT
It appears to me that China is calling for a fixed rate currency policy over the existing forex open but still manipulated market. That would of course be good for them but very bad for main street America. China cannot be that naive to believe that we are not as highly regulated as they are. Maybe it is just that they do not comprehend, like many Americans, the level of corruption and manipulation occurring in our system? The Chinese social engineers appear to actually believe they are regulating their system when in fact they have just allowed the free markets to bring them out of the catastrophic effects of a long term period of totalitarian rule and are riding the wave of prosperity. The one post is correct in that investors would never invest in a market that is manipulated and controled and the more free market and uncontroled the more likely people are to participate. We see this in our system right now as investors remain skepticle of the next policy change coming out of the Treasury and FED. After Madoff, AIG and the CDO debacle, I hope that investors will start heeding the old cliche "Caveat Emptor" and stop putting their faith in the social engineers/regulators. Haven't you all lost enough money already to the financial elites and their hedge funds and fraudulent naked short selling?
Tags: china, forex, naked short selling, Caveat emptor,
2.
Posted by Skynet91 | 03/27/09 07:14 AM EDT
The Chinese still do not understand that it is our DEMOCRACY, not our financial system that people are investing in. The fact of the matter is, no one wants to invest in a non-market Communist dictatorship that does not respect the rights of the individual.
3.Posted by bruiserND | 03/26/09 07:56 PM EDT
"Every spouse is entitled to have a life insurance contract on her husband."
"Its an entirely different thing when she and her tennis instructor that she's having an affair with buy the policy."
" When she, her lover and 100 people in their swingers club all buy policies, it's murder".
There is your credit default swap analogy.

It's no wonder they are "opaque"
It's no wonder they are "unregulated"
It's no wonder that the federal reserve said that they are "secret" .
It's no wonder that the federal reserve refused to disclose where the $2 trillion went when Bloomberg and FOX news dragged the federal reserve/ U.S. Treasury into court.
It's no wonder that Congress and the Senate won't have open televised public hearings on CDS.
It's no wonder that the fed/Treasury refused to bankrupt the companies that wrote CDS , thus giving the bankruptcy court the authority to tear up CDS contracts.
It's no wonder why everything is an "emergency" and a "crisis'" that have to be solved in 5 minutes without public hearings. Rush, rush, rush, rush. Says who?
It's no wonder that Alan Greenspan joined John Paulson & Co UK one of the billion dollar hedge funds that bought Credit Default Swaps. http://www.reuters.com/article/p ... an-2008+PRN20080115
It's no wonder that Congress won't look into whether Rockefeller ,Kissinger,Rubin,Frank, Dodd, Clinton, Obama, Pelosi , Reid, Greenspan, Schumer etc. own credit default swaps in foreign bank in their personal accounts .

CDS are the weapon of mass destruction that an alliance between social engineers and financial engineers used to wipe the United States of America off the map.
4.Posted by Horden | 03/26/09 04:49 PM EDT
It is the very veto talked about in the last paragraph which concerns China and many others. After seeing reactions in the USA to the Oil Crisis of the early 70's, the grotesque Balance of Payments deficits and surpluses of the '50s and '60s, as well as the initial protectionist utterings in this recession, many commentators believe the USA uses its $ = reserve currency position to fund its own ends at the expense of other economies. Isolationism is still very much the spectre the USA uses to retain its monopoly powers in world financial markets. The world economic balance is changing - if the USA does not respect this, eventually we will all lose much more than is being lost in the current crisis. Isolationism = selfishness and goes totally against 'In God We Trust' - perhaps this should change to 'In US(A) We Trust', as we don't seem to trust anyone else!
5.Posted by jakegsd | 03/26/09 04:38 PM EDT
China has a point that our markets require better regulation. At the same time, the government should add regulation to prevent our companies from exporting our jobs to places like China.

These actions are representative of capitalism out of control. The middle class is being canibalized by greedy capitalist that will commit fraud, take excessive risks, send jobs to 3rd world countries in order to maximize profits regardless of the impact to their society!

I find it ironic that China is passing judgement given their human rights record, and they owe their current economic well being to these same capitalist that have sent millions of jobs to a country that is dragging it's knuckles out of poverty.